State and Federal Tax Breaks

Also likely to decline are some of the tax breaks given to news publishers, particularly those tied to sales and use tax breaks for newsprint, ink and other print-related expenses that are becoming a smaller part of the publishing business. All told, federal and state tax laws forgive more than $900 million annually in taxes related to newspapers and magazines. Print publications received about $150 million in federal tax breaks in the 2008 fiscal year – favorable rules for expensing circulation expenditures (worth about $100 million) and special treatment of magazine returns (worth about $50 million).

Most of the money from tax breaks comes at the state level. An analysis of tax data published in 37 of the 50 states showed that newspapers and magazines received state tax breaks of nearly $800 million in 2008.The largest amount, $625 million, is for a tax exemption on the sales of newspapers and magazines, and in some states from the sale of advertising services.The other tax break, totaling $165 million annually, comes from exempting sales and use taxes on newsprint, ink, machinery and related manufacturing equipment. Eleven 10 Public Policy and Funding the News states did not report or tabulate industry-specific data, so the actual total of state tax breaks for newspapers and magazines could well exceed $1 billion annually. Some of these tax breaks are more valuable to the news business than others. For example, only a portion of the tax exemption on newspaper and magazine sales represents a monetary benefit. However, these tax preferences still provide a tangible subsidy, and all result in revenue losses for the government.

Federal and state tax laws forgive more than $900 million annually in taxes related to newspapers and magazines. Print publications received about $150 million in federal tax breaks in the 2008 fiscal year.

At least one state has recently taken action to increase its tax subsidies to newspapers. In 2009, with one of its largest newspapers (the Seattle
Post-Intelligencer) about to cease publication, Washington state
enacted a $1.3 million tax break for the state’s newspapers. Gov. Christine
Gregoire, signing the legislation, acknowledged that it amounted to a token
subsidy for a statewide industry with hundreds of millions in revenue. “The
industry has to right itself, and government can’t and won’t be a part of
it righting itself,” she told the Associated Press. “But I don’t want
government to be part of the reason that this industry can’t make it.”
David Zeeck, publisher of the News Tribune of Tacoma, said the
legislation would save his newspaper about $100,000 – enough to save the
jobs of two reporters.

The cumulative effect of reduced government support is not the primary
problem afflicting news businesses today. Newspapers alone have lost more
than $20 billion in revenue in the last three years; at most the reduction
in government assistance amounts to a few billion dollars. Yet this funding
provides building blocks for economic survival, and the cutbacks land
harder on some than others. Small businesses have been particular targets.
Reductions in postal subsidies and, prospectively, public notices fall
particularly hard on weekly newspapers and small magazines.

Further, they raise this question for policymakers: If two centuries of
government assistance for the news business are disappearing, and
disappearing at a particularly difficult time for publishers, are there
steps government should now take to make certain democracy’s information
needs continue to be met?